The housing market has been at the forefront of conversation for the better part of the last year. As a younger generation is looking to become first-time homeowners, we've witnessed a run on housing prices, unlike anything we've seen before. Alongside inflation and increased global volatility, many people are wondering how to safely manage their financial futures. This all begs the question; is now a good time to invest in real estate?
At The Hard Money Co., we firmly believe the answer is "YES". In the last 6-months, we have helped more investors than ever before acquire profitable assets and generate meaningful returns on their investments.
We're confident that this trajectory will continue and we want you to find yourself in a position to profit. There are a number of factors at play, but what follows are some of the biggest reasons for optimism in the real estate sector.
Volatility in other Asset Classes
Anybody that's been paying attention knows that our conventional financial markets are going through a period of intense volatility. For the better part of the last two years, we've seen unprecedented growth in the market at large, and only recently some dramatic price falls. It is likely that these fluctuations will continue and many consider this longstanding bull market to be on its last legs. Additionally, other alternative asset classes are experiencing similarly exaggerated swings. Anyone that has holdings in cryptocurrencies, NFTs, or other digital assets can attest to this fact.
While we would never recommend completing divesting from your other holdings, diversification through real estate can limit your exposure to this volatility all while giving you the opportunity to generate meaningful short-term returns through various investment strategies (i.e. Fix and Flip, BRRRR, Short-term-rentals, etc.). A well-rounded portfolio should be your goal in any environment but is especially important now.
Hedge Against Inflation
Right now we're seeing record inflation coupled with exceedingly high real estate prices. Though these two things are correlated, the extent of that relationship is likely exaggerated. Additionally, the timing considerations are not one-to-one. Experts have found that the short-term correlation is less obvious than the long-term relationship. This gives investors a potential time arbitrage advantage if inflation is expected to continue.
It's also important to note that the factors dictating home prices are different than those that cause inflation. On the real estate side, the causes are more acute. Shifting demographics can cause sharp increases in demand all while high costs of materials and labor can mitigate the supply. These variables happening alongside one another can cause dramatic shifts in prices.
Inflation, on the other hand, is primarily caused by federal monetary policy and is reflected most directly in consumer prices. In the long-run these price increases affect wages, which in turn affect household wealth and home prices, but in the short run, the relationship is more coincidental.
Owning a tangible real estate asset can be an effective way to hedge the effects of inflation on your cash savings or other investments.
Market Prices are at an All-Time High
As mentioned, real estate prices are at all-time highs as first-time homebuyers are looking to transition away from rentals. While it seemingly would be a bad time to be buying a home, there is an important distinction to consider. Prices remain high for properties that are 'move-in ready'. People are not sinking huge sums of money into houses that require extensive renovations and repairs. Additionally, traditional financing institutions will only lend on the current valuation of a property. For distressed assets, there is a dramatic gulf between what the property is worth today and what it might be worth in six months ' time. Homebuyers in the market today are unable to bridge that gap which has created a bifurcated market.
Investors today are able to buy distressed assets that traditional buyers don't have access to, and sell them into highly competitive markets a short time later. This means that the profit potential on real estate investments, particularly with Fix and Flip or BRRRR strategies, is as large as its ever been.
What opportunities are available to invest in real estate?
Another added benefit of investing in real estate today is that it's more accessible than ever. There has been an influx of highly successful Real Estate Investment Trusts (REITs) that have demonstrated strong returns and exhibit high levels of investment transparency. Individual investors can enter the real estate sector with investment amounts as low as buying individual shares on the stock exchange.
Its also been easier to access specific real estate investments through crowd-funding platforms such as Fundrise or Crowdstreet. These give investors the ability to put money into specific properties. This bridges the gap between completely passive investing in stocks or REITs, and the highly involved investing of property management.
At the most involved level, beginners in real estate can also go at it alone and purchase properties of their own. This is possible even without large amounts of cash savings through the use of hard money lending companies such as The Hard Money Co.
Hard Money is a short-term financing option that helps buyers move quickly and decisively. Financing can be completed in as short as a week and borrowers can receive additional funds to help finance the repair. Most importantly, The Hard Money Co. lends based on the After Repair Value (ARV) of the property. We are aligned with your vision in the investment in a way that other lenders are not.
What can you do today to get started?
You have the ability to start your real estate investing journey in a number of ways, both big and small. Find the method that meets your existing abilities while still empowering your future vision for your future. If you are curious about where this intersection finds you, don't hesitate to let us know. We will work with you to find the investment vehicle that best suits your needs and gets you into the powerful wealth-creation tool that real estate offers.